From Rejections to $21M in Funding: A Founder Story

Launching a startup is a huge undertaking that will test your personal and professional relationships to the limit. Something serial entrepreneur and startup founder  knows a thing or two about.He pioneered the digital identity industry when he founded his startup  back in 2011.After achieving over $21M in funding, and solidifying its place as an industry leader, IdentityMind was successfully acquired by .When I put it like that, it sounds like a pretty straightforward success story, right? Like most stories we hear actually.Well, like most of those stories, that’s far from the truth.Success wasn’t always certain for IdentityMind. Back when he first had the idea, Garrett and his team struggled quite a bit:

“We would talk about it with people and they would look at us blank-faced.​​I’ll give you an example of how far this goes back. I was meeting with people like Jeff Bezos, who was getting the bookstore (Amazon — yes, it started as a simple online bookstore) going at the time.I was speaking to Peter Thiel & Elon Musk, who were at PayPal with another friend of ours Bill Harris. They were just getting that going with Max Levchin.Marc Andreessen was over at Netscape. I was over at Verifone.No one had ever discussed what Digital Identity was. We had to take that time to educate the market.We were pioneering the digital identity market. This meant lots of conversations about things that were unknown and confusing to people.

They spend four years in “stealth mode”, building the product and having conversations with the market.

Garrett Was Told “No” Countless Times

What got him through it, and ultimately led him to success, was the right mindset.

“Of course my co-founders and I saw the lack of demand. Sure, we were told “no” a million times — like a lot of entrepreneurs.After all, failure is the primary denominator in the entrepreneurial process.What it comes down to is your own drive, values, and commitment.Grit and tuning out the naysayers is critical. You must be resilient!Moreover, you’ve got to “scrap” as I call it.The best CEOs and entrepreneurs I know are what I call very scrappy people.

And what I mean by that is we work hard.

We work incredibly hard and give everything, every piece of our being to these journeys — even if they end unsuccessfully.

More than that, scrappy people are also very resourceful. You figure out a way to work for very little money.

The other major factor is, you and your co-founders make a commitment to each other.Do not underestimate your partners in any journey, business or personal.When times were tough, often what kept us going was our commitment to each other as a founding team.”

Throughout our conversation, Garrett shared actionable entrepreneurial advice from over 25 years of experience in Silicon Valley.The result is a must-read for any founder building a startup today.

Rui: Garrett, thank you so much for being here with us today. I can’t wait to dig into your experience building IdentityMind.

But first, can you tell us a bit about yourself and your background, please.

Garrett: Sure. So currently I’m based in Silicon Valley.

I have been working, primarily, in the digital identity, fraud and payments space for quite some time.I was part of a group of people that pioneered internet commerce early on.We started when people didn’t even understand what internet commerce was.We used to talk to people about buying things on the web and they used to laugh and say that it would never happen. That we were “crazy”.All to say, I’ve been focused on this space for some time.Interestingly, the payments and fraud space has evolved into the identity space over time as people are interacting more and more in their digital lifestyle.I’ve been very fortunate to be part of a lot of different phenomenal journeys through that space.I’ve been part of business concepts that have grown from small companies into public companies or companies that were acquired.

R: That brings us perfectly to your company, Identity Mind — which you started in 2009.

It kind of feels like it was not that long ago, but in reality, the maturity of the internet was nothing compared with what it is today.

Could you share the idea and value proposition behind the company, and your journey building it?

G: To explain the function of Identity Mind we need to go back to the ecosystem at the time.

As you said, the internet was maturing and evolving. Meanwhile, mobile phones began to pick up alongside it.As a result, the payments and e-commerce space was evolving rapidly.It was around ‘08/’09 and e-commerce reemerged and started to take hold. People started talking about it.I’ll give you an example of how far this goes back. Myself, meeting with people like Jeff Bezos, who was getting the bookstore going at the time.I was speaking to Peter Thiel & Elon Musk, who were at PayPal with another friend of ours Bill Harris. They were just getting that going with Max Levchin.Marc Andreessen was over at Netscape. I was over at Verifone. We were building these internet-based businesses and we were all working together.I should have probably hung out more with them and done more with them (laughs).

“E-commerce and digital payments were all evolving in parallel as the internet matured, more bandwidth became available, etc.”

Like many great journeys, IdentityMind came out of frustration around fraud payments. Really not being able to understand if the person is really who they say they are.I remember at the time, I was operating a company rivaling Paypal that was getting crushed by fraud. We had all these different technologies in place to try and understand what the problem was.We wanted to understand if the person is really who they say they are when they’re engaging in a completely digital transaction.

So we had this frustrating and serious issue. We recognized an inefficiency. But, as I always tell new founders, it’s not enough to recognize an inefficiency and build a solution.

You need to be able to show your vision and tell your story so well that people don’t just understand it. They feel it, recognize it and ultimately internalize it.

While I was working on that business I’d gotten really into CSI. And as I was watching that I realized something. The solution to the mystery always came through DNA.There’d always be a little spatter of blood somewhere and they’d trace it back to someone who knew something.And it got me thinking about this concept of digital identity and electronic DNA.That’s where the idea for IdentityMind sprouted from.So our challenge was:

“How do we take all of these digital breadcrumbs that are left when engaging in a transaction and begin to build the “eDNA” of the person behind them.”

Breadcrumbs such as geolocation, IP, email, address, credit card info, logins, etc.Can we take all of those things and build a reputable eDNA(profile) of them? So, when you engage in your next online transaction, the platform knows it can trust you right out of the gate.We focused on building the eDNA along with the network effect. It was a serious endeavor.At the time, there was no service let alone an identity platform that could do this. They were focused on all of these little signals or inputs that were disconnected from the digital world and issues arriving from Fintech.So you had this issue where, if you were a risk analyst, you could never get a holistic view of the individual or the business.In order to understand someone’s profile, whether it be risk-based or positive-based, you need that holistic view.And that’s where it all started.Once I exited the prior company that I had been working on, I started bouncing around ideas with some people I knew from other payments and fraud companies.We came together and realized this idea of the digital identity really made sense.But, to be very clear, back then there were a lot of point solutions out there. But no one had built a platform to address Digital Identity.In fact, no one even discussed what Digital Identity was — that led us to pioneer the industry.It’s also important to note:

“The journey for startup founders was very different back when we started.”

It took tremendous amounts of time, money, and effort to build platforms. It was a process of patience and pain, pain more than patience!

You had to have relationships that you could call on. Which is exactly what I did.

Expert Tip

“As entrepreneurs, we’ve all needed so much help to get to where we are, that we understand and most of us are still calling people looking for help!

So when you call entrepreneurs and say: Hey, can I get 20 minutes? I want to bounce an idea off you.

The answer is: Yeah. Okay.

Every single time”
, Serial Entrepreneur & Founder

R: I believe those crucial first few steps explain part of your success. You worked on a problem to solve, not an idea.

Then you shared your idea with smart people in your network to help you shape and build the best possible solution.

I’ve lost count of how many successful founders I know that followed the exact same path.

What happened next? How did you validate the idea in the market? Was it an MVP, proof of concept or did you build the full product?

G: Originally, it was a bunch of stuff on a whiteboard, as is often the case.

We laid out everything and said, “Ok, this is the way we think it should work.” We also all had real-life use cases which are important.That was the starting point.We had some people within our group that had great cryptographic, product, security, and pragmatic minds — awesome people!

With their knowledge, we built the basics of our architecture. We saw it as the baseline — the foundations of what would later become the platform.

We also knew it needed to be built with security by design — after all, we’re dealing with lots of data and digital identities.To give you a snap in time for some context, this was around 2008. The iPhone had just been released and we started to see truly smart devices out in the real world for the first time.We saw the usage of smart devices grow rapidly through 2010.However, the concept of your digital identity was very much a foreign thing to people. We would talk about it with people and they would look at us blank-faced.Fast forward to today and there are billions of dollars going into these markets and everyone understands what it is.But back then, part of the challenge for us was explaining the concept to people.We were explaining to people that we weren’t a security company. We’re not trying to figure out how to help you log in. We’re an identity company. We’re trying to build people’s identities for overall risk profiles.We were pioneering the digital identity space, and it took time for people to understand that.

“We spent close to four years in stealth mode building the platform.”

In that period, we spent a lot of time talking to different organizations out there to make sure the platform would perform as we envisioned. This was a critical part of the journey.Visa, MasterCard, Discover — from large payment processes to small pilot type stuff.We were working on refining the platform before moving it into production.

Ultimately we got our first customer because I had made an investment in an e-commerce company and they were getting killed with fraud. So, naturally, we needed to help them.

They were a pretty good-sized company at the time. They were selling directly to consumers online and experiencing some of their own fraud issues.They had ridiculous chargeback issues and we convinced them to use our platform — to become our beta customer.They agreed and the amount of fraud that they were able to capture and stop out of the gate was fantastic.They became our first customers.The other item that we really were working through perfecting (because of the platform side) was the SaaS model.The SaaS model has had different names. We used to say licensing models then ASPs (Application Service Provider), etc. That “transactional” model has been around a long time, particularly in the payment space.You pay for these things, and then you evolve it into subscriptions and you evolve it into different pieces. NetSuite obviously has perfected a lot of those areas.We were really working on different ways to handle our SaaS model.Aside from that, we were making sure we were sharpening the security side. We were handling a tremendous amount of PII (Personally Identifiable Information).

“We were also thrust into dealing with a lot of the early compliance functions that were starting to arise from Financial Services and FinTech.”

But on that side, we were very lucky. We had people in the team who were excellent at those things and had good thought streams on how to not just encrypt, but also anonymize the data. All while staying on-mission around digital identity and the ecosystem we were building.The average platform is going to take you, generally, a couple of years to correctly develop. Then, it takes time to get people on them, using them.Our goal was to create a network effect. What we would do is create all of these identities and all of this information. Then, if you were one of our customers, we would share that information with you across the network to better assist in risk or compliance decisions.This not only made the platform smarter and the identities better, in terms of reputation.If we had 20 giant marketplaces all using our platform, they would all benefit from each other, even though they were in competition.But as I used to communicate to people in our industry (and still do today it’s still very relevant):

“Don’t compete on risk. That’s a fool’s game.”

As an example, if I own a corner store and I’m getting robbed every day, I’m gonna tell the other corner stores in the area what the robber looks like.If I keep it to myself, we all keep getting robbed and we all lose out.That was the whole function of creating this network effect.And that’s become a very good data point for the industry. Before, banks wouldn’t share information. Payment companies wouldn’t share information. Risk companies wouldn’t either. This was crazy to me and needed to be changed.Now they collaborate a lot more to try and help the overall ecosystem and their overall marketplace around having some integrity.A lot of these things are offshoots of what we’ve built.

R: I have a bunch of follow-ups, starting with the four years you were in stealth mode developing the product.

Something we talk about a lot in the startup world is the importance of a short time to market.

The risk that a competitor might come along and beat you to the market is high because, as you mentioned, it’s much quicker to build things nowadays.

That being said, we also talk a lot about the importance of timing your product correctly — something I feel is very relevant for your company.

The demand for your product in 2009 was nothing compared to 2013 — the ecosystem evolved extremely quickly in just a few years.

Do you think that taking those four years to develop your product helped in your success?

G: For me, there are two points here.

One, we were very early. We were never going to be able to release in a one-year window because as you pointed out, the market wasn’t there yet.So we had to take that time to educate the market.Again, we were pioneering the digital identity market. This meant lots of conversations about things that were unknown and confusing to people.Secondly, as smart devices became more popular, fraud exploded. Everyone was coming out with mobile banking apps. Suddenly, the importance of knowing someone’s true identity in the digital world skyrocketed.

Related: 

R: That to me also signals an incredible level of commitment to the project.

I mean, the market was there and you knew it, but for most people, the conclusion might’ve been: “okay, there is no demand for this now. Let’s move on and build something else. “

Why did you stick with it for four years? What made you believe that this would eventually be a thing?

G: One is your belief and values. I had experienced issues of fraud and knew nothing else was catching it. If anyone has been robbed it becomes very personal, very violating, and that stings.

The other major factor is, as you mentioned, that .Do not underestimate your partners in any journey, business or personal. I was fortunate to have partners with true values and grit. And that’s a strong thing.Additionally, grit and tuning out the naysayers is critical. You must be resilient! It’s one of the reasons you’ll have a hard time being an entrepreneur if you quit early.You have to keep the healthy function of ego, but you have to be incredibly humble through these processes.You can go through an amazing journey and generate a lot of wealth from it.But critically, it’s one of the most amazing kinds of self explorations that you’ll ever go through.You’re testing your family relationships, your friendships, and mostly yourself, financially and emotionally.And people see these big payoffs and they think that’s how it all works.I can tell you, the majority of us have lost more money than you can believe. Failed more times than you can believe. Failure is the primary denominator in the process or journey of this great self-exploration.So what it comes back to is your own drive, values, and commitment.Of course, my co-founders and I saw the lack of demand. Sure, we were told “no” a million times — like a lot of entrepreneurs.I was writing checks from my personal bank account to fund the company. I was blessed to be in a position where I could do that, but that also tests your relationships. Those are incredible positions to put your family in — taking those risks.

“What kept us going was our commitment to each other as a founding team.”

And that commitment only gets more important as the process goes on.

If you raise money or take money from other people, you better be very committed to seeing the project through. And I mean working tirelessly and laying it all on the line. Do not think there is some balance as there is no such thing.

You also need to be upfront and transparent with the people you’re .If you take money from friends and family they need to know that if they put in $5k, $50k, $100k, whatever it is, they need to know they may never see it again. It is obvious but always important to highlight.Before you take a penny, you need to say to them “Hey, if you can’t afford to lose this money, don’t do it.”

I can’t stress this enough, they’ve got to be okay with it if that money disappears.

And, as I said if they do give you that money, you’ve got to “scrap” as I call it.The best CEOs and entrepreneurs I know are what I call very scrappy people.

And what I mean by that is we work hard.

We work incredibly hard and give everything, every piece of our being to these journeys — even if they end unsuccessfully.

More than that, scrappy people are also very resourceful. You figure out a way to work for very little money.

But you also learn how to work with partners, vendors, investors, etc. across all of these areas.

You learn how to extract the most from people. Who you are not paying a tremendous amount of money to in a lot of cases.But you’ve gotta be scrappy and you have to understand how to rub two pennies together to make your dollar go further.That’s all part of this amazing journey of self-discovery.That’s a long answer to your very simple question of what kept the company going for those four years. But really it’s what kept the company going for ten years.

Expert Tip

“Most startups fail because of some sort of HR dynamic. The vision might be good, the market might be good but if your team can’t execute against it then you’re already one foot in the grave.”
, Serial Entrepreneur & Startup Founder

R: I feel it’s a very important answer. People need to know this.

I feel like often people see success as a straight line — and I know it’s not.

There’s a lot of effort and a lot of sacrifices into building a successful startup.

Let’s not forget that even today, with everything that technology allows us to do, the failure rate of startups is still above 90%.

So it’s not easy. I agree with you that commitment plays a big part in successful entrepreneurship.

G: You could be on death’s door and make a turn a week later. There are so many successful companies that have gone through that — Amazon is a  of that.

“Critically, when your startup is on death’s door it’s dependent on you, the founder, as to whether or not your startup makes that turn.”

It takes a certain mindset. The ability to go past where most people would throw in the towel. Most entrepreneurs I know never throw in the towel.

R: I feel like part of that mindset goes back to something you already mentioned, which is the idea of an industry working together towards the same goal.

I recently  and we discussed the importance of sharing your ideas. And how crucial it was for him when he pioneered subscription-based flying and built Surf Air.

I see a lot of entrepreneurs not sharing their ideas because they’re worried that someone will steal them.

Or they will keep something from their competitors even if that could provide value to their industry.

This ties in with this idea of not competing on risk — of being open with your competitors to better the industry.

G: Back when I started in business I learned very quickly what I did and didn’t like.

Firstly, I despised the politicking that went on in these companies and the time that was wasted because of it.Off the back of that, I saw how important culture is both for the company and your extended network.In the early days of Silicon Valley, while everyone competed hard, it didn’t matter if you were at Cisco, Juniper Network, HP, Oracle, etc. everyone also engaged & collaborated.People at Intel would have a problem with their supply chain so they’d call someone from Qualcomm to see if they had a solution.They weren’t there to kill each other. They may like to appear that way but in the end success for the market was the most important issue at hand.Instead, they were competing on different merits, but collaborating on the shared problems they had.That thought process is essential for entrepreneurs.The majority of entrepreneurs don’t start with this mindset. I’d never really thought about this before but a friend brought it to my attention once. Much of the message is about the  and understanding we all need help and behaving with more humility may go further.As an example, in the beginning, you start out not saying anything to a competing entrepreneur. You’re in that space of, if I see you in the street you’re my competitor.It’s like that for the first couple of years. Then, maybe in year four, you see that same “competitor” again.This time you’ve matured a bit, and you’ve seen each other’s achievements and you respect each other a little more.Fast forward and you’re 10, 15 years down the line and you’re still in the marketplace with them.You’re collaborating with them despite the competition between you.So this all comes down to the difference between self-confidence and ego.For an entrepreneur, that self-confidence is vital. That being said, ego can kill a startup — so erase it.I’ve become a very different person over my career through actively doing this. From practicing humility to being more understanding.But critically, none of this should stop your drive or passion. Instead, it changes your approach, significantly, to people, problems, and solutionsSo, as a startup founder, I would say leave the ego at the door.More than that, talk to everybody you can, because really what you’re doing is you’re sharing your passion for your project.And that journey is going to be tough because you’re gonna have a lot of people that tell you “no” along the way.It comes down to timing the product well, a little bit of luck, and a lot of perseverance.

Thank You, Garrett…

… For taking the time out of your busy schedule to sit down with me.As you can see from the above conversation, the right entrepreneurial mindset is key when launching your startup.You’ll inevitably face barriers throughout your journey. It’s how you push through those barriers that will determine whether or not you succeed.First Published at: //altar.io/founder-story-how-rejection-turned-into-21m-in-funding/